Is Now The Time To Put Zhejiang Songyuan Automotive Safety SystemsLtd (SZSE:300893) On Your Watchlist?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Zhejiang Songyuan Automotive Safety SystemsLtd (SZSE:300893), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Zhejiang Songyuan Automotive Safety SystemsLtd

How Quickly Is Zhejiang Songyuan Automotive Safety SystemsLtd Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That makes EPS growth an attractive quality for any company. Recognition must be given to the that Zhejiang Songyuan Automotive Safety SystemsLtd has grown EPS by 38% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. It's noted that Zhejiang Songyuan Automotive Safety SystemsLtd's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Zhejiang Songyuan Automotive Safety SystemsLtd maintained stable EBIT margins over the last year, all while growing revenue 61% to CN¥1.8b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Zhejiang Songyuan Automotive Safety SystemsLtd?

Are Zhejiang Songyuan Automotive Safety SystemsLtd Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that Zhejiang Songyuan Automotive Safety SystemsLtd insiders own a meaningful share of the business. To be exact, company insiders hold 67% of the company, so their decisions have a significant impact on their investments. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. And their holding is extremely valuable at the current share price, totalling CN¥4.9b. That means they have plenty of their own capital riding on the performance of the business!

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Well, based on the CEO pay, you'd argue that they are indeed. The median total compensation for CEOs of companies similar in size to Zhejiang Songyuan Automotive Safety SystemsLtd, with market caps between CN¥2.9b and CN¥12b, is around CN¥968k.

Zhejiang Songyuan Automotive Safety SystemsLtd offered total compensation worth CN¥507k to its CEO in the year to December 2023. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Does Zhejiang Songyuan Automotive Safety SystemsLtd Deserve A Spot On Your Watchlist?

Zhejiang Songyuan Automotive Safety SystemsLtd's earnings have taken off in quite an impressive fashion. An added bonus for those interested is that management hold a heap of stock and the CEO pay is quite reasonable, illustrating good cash management. The drastic earnings growth indicates the business is going from strength to strength. Hopefully a trend that continues well into the future. Big growth can make big winners, so the writing on the wall tells us that Zhejiang Songyuan Automotive Safety SystemsLtd is worth considering carefully. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Zhejiang Songyuan Automotive Safety SystemsLtd (1 is concerning) you should be aware of.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in CN with promising growth potential and insider confidence.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.